If the market expects interest rates to fall in the future, what shape would you expect to
Question:
If the market expects interest rates to fall in the future, what shape would you expect to see in a graph of the Term Structure?
Downward sloping
Upward sloping
Humped
Flat
None of these are correct
What is the basic idea behind any calculation based on the Expectation Hypothesis model?
Group of answer choices
Investment strategies that span different amounts of time are expected to earn different amounts over the investment horizon.
Investment strategies that span the same amount of time are expected to earn different amounts over the investment horizon.
Investment strategies that span different amounts of time are expected to earn the same amount over the investment horizon.
Any investment strategy that spans the same amount of time, is expected to earn the same amount over the investment horizon.
None of these are correct.
Which type of investor might have a particular preference for long-term bonds, independent of market interest rates?
Group of answer choices
Pension funds
Money market funds.
Corporations raise large amounts of capital.
All of these investors would prefer long-term bonds.
None of these investors would prefer long-term bonds.
Expert Answer:
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